IMF Head Praises Argentine Efforts

MARTIN CRUTSINGER

Published 8:00 pm, Thursday, February 7, 2002

AP Economics Writer

The head of the International Monetary Fund praised Argentina's efforts to reopen banks and foreign exchange markets as a welcome development in the country's efforts to deal with a serious economic crisis.

Argentine officials now say they will reopen foreign exchange markets on Monday, a date twice postponed to give authorities more time to prepare for the debut of a free-floating Argentine peso.

"The reopening of the banks and the foreign exchange markets will be a good step forward," IMF Managing Director Horst Koehler said Friday in a statement issued by the IMF.

A free-floating currency had been one of the primary demands of the IMF before it would begin negotiations over what Argentine officials hope will be new IMF loans totaling as much as $25 billion.

New President Eduardo Duhalde moved to scrap the peso's decade-long link to the U.S. dollar four days after he took office last month. But the dual exchange rate the government attempted to impose met strong objections from the IMF, which said it would be far preferable to allow the peso to float freely with its value determined by market forces.

In his statement, Koehler also said he was looking forward to a visit Tuesday to Washington by Economy Minister Jorge Remes Lenicov.

That visit is seen as an important milestone in Argentina's efforts to win a resumption of IMF lending.

If Argentina's talks with Koehler and other top IMF officials go well, the IMF is expected to announce it will dispatch an IMF team to Buenos Aires to begin developing a new economic program that would allow the IMF to resume loans.

Late Friday, the U.S. Treasury announced it was sending one of its top banking experts to Argentina as part of a delegation of financial experts from Brazil, Spain, Italy and Mexico who will provide technical advice to the government.

Jose A. Tuya, director of international banking in Treasury's Office of the Comptroller, will be in Buenos Aires on Monday for meetings with officials at the country's Finance Ministry and central bank, Treasury spokesman Tony Fratto said.

It was a decision by the IMF in December to halt new loans that helped to precipitate the current crisis. Authorities have defaulted on the country's massive $141 billion foreign debt and are dealing with violent street demonstrations spawned by the worsening economic conditions.

"The fund is continuing to work closely with the authorities in their efforts to formulate a comprehensive and sustainable economic program," Koehler said.

The IMF decision to release a brief statement followed objections raised by Remes Lenicov on Wednesday that the 183-nation lending agency had failed to express enough support for the government's new economic and budget plans.

Koehler is scheduled to give an update on the Argentine economic crisis when he meets Saturday in Ottawa with Treasury Secretary Paul O'Neill, Federal Reserve Chairman Alan Greenspan and their counterparts from the world's seven richest industrial countries.

The Group of Seven meeting with finance officials from the United States, Japan, Germany, France, Italy, Britain and Canada is expected to deal not only with the Argentine crisis but also provide a forum for the finance officials to review efforts to jump-start global economic growth.

O'Neill, giving reporters a preview of the discussions, said Thursday that he believes the worst part of the U.S. recession is over and the "seeds for a recovery" are in place.